From USA Today:
Housing slowdown smacks Realtors hard
Chris Beach often works through lunch and seldom leaves the office before 9 p.m. So far this year, he’s taken 2½ days off from work. And he hesitates now to take vacations, because he fears losing business: potential home buyers or sellers.
“My wife went out and bought two dogs because I’m never home,” says Beach, whose hands-free cellular earpiece seems permanently attached to his head.This is the life of a real estate agent in a market in which in the past year home sales have tumbled 30%, prices have fallen 13% and there’s a one-year supply of homes for sale.
In many markets across the country, the glamour of the go-go days — when investors bought homes sight-unseen and lenders didn’t require down payments — are gone. In those areas now, the job of an agent is one of chasing leads, marketing like hell and chauffeuring hesitant buyers to open house after open house.
“Since the first of the year here, I’ve shown more homes than all of last year, and worked more hours on a regular basis,” says Beach, 39, one of the top-producing agents at Coldwell Banker Elite.
For many of today’s agents, this is the first housing downturn they’ve ever seen, and it’s become a belt-tightening test of their staying power. Nearly 25% of Realtors nationwide received their real estate license in the past two years, just as the market had peaked and was turning south.
Yes, Real Estate Prices Can Drop in Half–Even in Manhattan (June 8, 2007)
One of the most enduring cliches of the real estate industry is that properties in “prime locations” such as Manhattan and San Francisco “never go down.” Nice idea, but wrong. Let’s take a look at a chart, courtesy of http://www.quadlet.com (link below). I’ve added some lines and comments to clarify the sobering reality:
In the last real estate decline in the 90s, Manhattan prices fell 40% nominally and 60% when adjusted for inflation:
If you need more evidence, then read 100 years of Commercial Real Estate prices in Manhattan (MIT):
Then during the 1920s prices rose almost 3% yearly in real terms. The depression saw real prices drop in half, and the 1940s saw them slightly more than fully recover. Real prices dropped about 2% yearly from 1949 to 1969 and then rose 3% yearly from 1969 to the famous peak in property values of 1989. From 1989 to 1999 prices dropped in half – again adjusted for inflation.
Note in the above chart that when you adjust prices for inflation, current prices are actually lower than the peak set in the late-80s. Chart technicians would draw an inference from this: “lower highs and lower lows,” meaning that the next low in the Manhattan real estate market would be significantly lower (in both nominal and real terms) than the last low.
If we extrapolate from history–and we do have 100 years of data–then we can expect Manhattan property–yes, every “prime” square inch of it–to decline 40% to 50% in nominal terms and from 50% to 60% in inflation-adjusted terms.
Any way you slice it, that’s serious money being lost. Here is the link to the source of the above chart: Are Real Estate Prices Dependent on Mortgage Rates?
This data begs one nagging question: if “prime real estate” is set to drop in half, then how far will less-than-prime real estate drop?